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Exercise 7-6(Algo) Variable and Absorption Costing Unit Product Costs and Income Statements...

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Accounting

Exercise 7-6(Algo) Variable and Absorption Costing Unit Product Costs and Income Statements [LO7-1, LO7-2]
Lynch Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations:
Variable costs per unit:
Manufacturing:
Direct materials $13
Direct labor $55
Variable manufacturing overhead $1
Variable selling and administrative $1
Fixed costs per year:
Fixed manufacturing overhead $320,000
Fixed selling and administrative $230,000
During the year, the company produced 32,000 units and sold 17,000 units. The selling price of the company's product is $53 per unit.
Required:
Assume that the company uses absorption costing:
a. Compute the unit product cost.
b. Prepare an income statement for the year.
Assume that the company uses variable costing:
a. Compute the unit product cost.
b. Prepare an income statement for the year.
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